What’s the difference between Euro FX futures and Eurodollar futures?

Euro FX futures and Eurodollar futures are two different types of derivatives contracts that allow investors to speculate on the future value of the euro currency. The main difference between them is that Euro FX futures are based on the actual exchange rate between a particular currency pair (e.g EUR/USD) while Eurodollar futures reflect the dollar-denominated deposit rates between banks in Europe.

For example, if an investor believes that the euro will appreciate against the US dollar over time then they can purchase a Euro FX future to take advantage of this movement. On the other hand, if they believe that European bank deposits are expected to increase which would lead to higher interest rates for borrowing from them then buying a Eurodollar future may be more appropriate.

Overall then, despite both being based on speculating about potential changes in foreign exchange rates, there is still an important distinction between these two types of derivatives contracts which traders should understand before attempting to utilize either one in their trading strategy.